Fuel

To reduce vehicle GHG emissions, the development of fuels with lower fossil carbon content1 is a vital complement to improvements in the fuel economy of our vehicles.

Electrification

Running vehicles partly or wholly on electricity can reduce or eliminate CO2 emissions from the vehicle itself, but the overall emission benefits depend on the fuel or mix of fuels used to make the electricity. Because electricity can be made from a wide variety of fuels, including domestic sources and renewable fuels, electrification addresses both energy security and climate change concerns. It also offers flexibility in tailoring lower-carbon solutions based on locally available fuels and technology options like carbon capture and storage. We have accelerated the electrification part of our vehicle and fuel technology plan, as follows:

• In 2010, we will introduce the Transit Connect battery electric vehicle, a compact van, for low-volume sales to fleets.
• By 2011, we will bring a battery electric Focus to North America.
• In 2012, we will introduce our next-generation hybrid technology and plug-in hybrid vehicles.

Expanding electrification holds tremendous promise, but a range of implementation challenges must be considered. These challenges relate to cost, battery technology, the development of charging infrastructure, the interface with utilities and how to ensure that potential emissions-reduction benefits are realized. We have partnered with the Electric Power Research Institute and Southern California Edison to explore these and other issues involved in expanding the use of plug-in hybrid electric vehicles. This partnership was expanded in early 2009, and through it Ford will now supply plug-in vehicles to eight additional partners for real-world testing:

• New York Power Authority
• Consolidated Edison of New York
• American Electric Power of Columbus, Ohio
• Alabama Power of Birmingham, Alabama, and its parent, Atlanta-based Southern Company
• Progress Energy of Raleigh, North Carolina
• DTE Energy of Detroit, Michigan
• National Grid of Waltham, Massachusetts
• New York State Energy and Research Development Authority

Electrification issues and our partnerships are discussed in more detail in the electrification case study.

Biofuels

Biofuel use is expanding globally, with bio-ethanol made from corn, beets or sugar cane substituting for gasoline and biodiesel derived from plant oils substituting for diesel fuel. In the United States, 2007 legislation expanded the Renewable Fuel Standard (RFS), mandating a significant increase in the use of biofuels by 2022.

While current corn-based bio-ethanol production in the United States is estimated to provide a modest reduction in vehicle GHG emissions on a well-to-wheels basis, next-generation biofuels such as ligno-cellulosic bio-ethanol could offer up to a 90 percent GHG reduction benefit.2 Building a substantial fleet of flexible fuel vehicles (FFVs) provides a bridge to the widespread use of lower-carbon biofuels in the future.

Ford has a long history of developing vehicles that run on renewable biofuels. We produced the first flexible fuel vehicle approximately 100 years ago: a Model T capable of running on gasoline or ethanol. Globally, Ford offers 19 models in the United States, Europe, Asia and South America that can run on E85, a blend of up to 85 percent bio-ethanol mixed with gasoline. Ford has manufactured more than four million FFVs, including 2.5 million in the United States and 1.8 million in Brazil.

In Europe, Ford is a market leader and pioneer in bio-ethanol-powered FFVs, with nearly 65,000 vehicles delivered to customers since 2001. Ford FFV models are now available in 17 European markets, with Sweden, Germany, the Netherlands, Spain and France showing the strongest demand.

In the United States, we have committed to doubling the number of FFVs in our lineup by 2010. Assuming continuing incentives that encourage the manufacture, distribution and availability of renewable fuels and the production of FFVs, we stand ready to expand FFV output to 50 percent of total vehicle production by 2012.

Alternative fuels pose a classic chicken-and-egg problem, however: automakers can produce a range of products capable of running on fuels with varying carbon content, but the benefits are only realized if energy providers bring the fuels to market and consumers demand both the vehicle and the fuel.

Ford is part of Bio-Ethanol for Sustainable Transport, or BEST, which has pilot projects planned or under way in the UK, Spain, Italy and the Netherlands. We are also supporting the PROCURA project, which is establishing test programs for ethanol, biodiesel and natural gas in Italy, Portugal, Poland, Spain and the Netherlands.

The markets for ethanol alternatives to gasoline were affected by the plunge in oil prices in the latter half of 2008. In the long term, we believe that next-generation biofuels made from a variety of feedstocks, including agricultural wastes (particularly ligno-cellulosic material) will be an important part of the GHG emission-reduction equation and will help address concerns about current-generation biofuels, including the potential competition between food and fuel crops and conversion of natural lands to fuel production. These issues are explored in more detail in the Sustainable Technologies and Alternative Fuels Plan.